Income from Mutual Fund and Interest from Income Tax Refund is Taxable as ‘Other Income’: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the income from mutual fund and interest received from the income tax refund shall be taxable as “income from other sources” for the purpose of Income Tax Act, 1961.

The assessee, a resident Company, engaged in the business of construction, builder and developers etc. of residential houses, commercial building etc. For the assessment year under dispute, the assessee had filed its return of income on 10.10.2015 declaring loss of Rs. 73,04,323/-.From the break-up of interest income, he found that an amount of Rs. 11,74,070/- was received from Fixed Deposits with Canara Bank, amount of Rs. 18,745/- from mutual fund and Rs. 1580/- towards interest on income tax refund. The Assessing Officer held that the interest income cannot be netted off against the revenue expenses. Further he held that the interest income has to be taxed under the head “income from other sources”. Accordingly, he added back the amount of Rs. 11,94,395/- as income from other sources.

Judicial Member Mr. Sakjit Ray observed that the interest income earned on fixed deposits has to be treated as business income of the assesee.

“That being the case, it has to be set off against the revenue expenses. However, this is only to the extent of interest incomeearned on fixed deposits. As far as income earned from mutual fund and interest from income tax refund, they have to be taxed under the head income from other sources. Thus I allow assessee’s claim of assessment of interest income under the head business to the extent of Rs. 11,74,070/-. Whereas, the balance amount of Rs. 20,325/- is to be taxed under the head income from other sources. In so far as the issue of set off of income from other sources against the revenue expenses in terms of section 71 of the Income Tax Act, I admit the additional grounds as they do not require fresh investigation into facts,” the Tribunal said.

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